The Chinese economy’s recovery from the pandemic’s onslaught resulted in a solid showing from e-commerce giant Alibaba (BABA) in its latest quarterly report. The internet giant reported revenue of $21.76 billion, up by 34% year-over-year and beating the estimates by $470 million. Non-GAAP earnings came in at $2.10 a share, beating consensus calls for $1.99.
The uptick was mainly driven by strong growth in the company’s Chinese commerce and cloud computing businesses.
The cloud segment particularly impressed. Ali Cloud revenues grew by 59% year-over-year, as adoption accelerated due to the pandemic. Ali Cloud has cemented its place as the leader of Chinese cloud services, its sales more than double those of the second largest player (Tencent).
In fact, Needham analyst Vincent Yu believes Cloud remains the “best pick for investors to ride the secular trend of cloud adoption in China.” The Chinese cloud industry is currently only 1/8 the size of its American counterpart, indicating to the analyst, the “growth runway is long for the industry and for Ali Cloud.”
Otherwise, Yu said there were a lot of things to like about the latest report and mentioned, ”1) Average spending for consumers in all city tiers grew for the quarter, and consumer demand rebounded strongly, which reaccelerated Tmall’s physical goods GMV growth to 27% from 10% in 4Q20; 2) Healthy growth of user base indicated by 28 million net adds in MAU, +5 million more than we expected; 3) Taobao Deal reached 40 million in MAU, which helps Alibaba acquire value conscious consumers, very important when competing with social e-commerce platforms; and 4) FMCG and electronics categories grew the fastest within Tmall, indicating Alibaba is taking market share in key categories as both are flagship categories for its competitors.”
Overall, Alibaba has plenty of support amongst Yu’s colleagues. Barring 1 Hold, Alibaba’s Strong Buy consensus rating is based on Buys only – 20, in fact. The average price target is $293.35 and implies shares will add a 6% from current levels. (See Alibaba stock-price forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.